Personal insurance may be the most basic tool for asset protection that a person can have. Whether your assets are worth millions of dollars or merely worth hundreds of dollars, the reality is that most of us lack the financial resources to pay to repair or replace our property if it is damaged, destroyed, or stolen. In addition, if we make a mistake, and, being human we are bound to make a mistake or two, and that negligence causes an injury to someone else, few of us have the financial resources to pay for that injury outright. Personal insurance fills in those gaps, providing a way to protect individual assets from loss and also serving as a way to shield other personal property from judgments in the event of negligence.
There are various different types of personal insurance. Life insurance may be the most basic type of personal insurance. Life insurance provides payments to your beneficiaries in the event of death. Life insurance is critical to protect your loved ones in the event that you are the breadwinner and pass away; an unexpected or early death can financially destroy a family. However, life insurance policies also exist to cover things such as funeral expenses, and, while it may initially seem macabre to have life insurance on the children or the elderly, covering those expenses can be a burden. Many life insurance policies marketed towards children can also be used as savings plans and converted to cash value. Automobile insurance is the first type and it comes in multiple formats. Most states require drivers to carry some form of liability insurance, which is insurance designed to protect other drivers from your negligence and pay for their injuries and property damage in the event of an accident. States have different minimum liability insurance requirements.
Uninsured driver policies pay for damages to you or your vehicle that result from accidents where the other driver lacks insurance. Comprehensive or full-coverage auto insurance policies pay for your damages even when you are found to be at-fault during the accident, though disclaimers on those policies will generally prevent payment to you under certain circumstances, such as if you were DWI or DUI. Homeowners insurance is designed to protect a home that you own including the real property and personal property contained within the home. It is important to realize that contents coverage in homes is generally limited, so that very expensive items such as jewelry or artwork may need their own coverage. However, many homeowners policies offer coverage for things that might not appear to be covered under a homeowner’s policy, such as if your dog bites someone while on a walk away from your home.
These policies may also come with unexpected exclusions. The most common of those exclusions is that most standard policies do not cover flood damage, and additional flood insurance must be purchased to cover that damage. Renter’s insurance is different from homeowner’s insurance. Renters insurance specifically excludes damages to the real property and only protects the renter’s personal property, but some renter’s insurance policies may contain provisions protecting the renter from negligence claims. Personal umbrella insurance is insurance meant to provide you protection in the event that you are held liable for negligence that is not otherwise covered by one of your other insurance policies. Keeping in mind that you can be sued and held liable without any negligence on your part, personal umbrella policies can be an important piece of asset protection for people who have significant interactions with others.